Small business owner optimism up but still below average

Small business owner sentiments continue to improve amid positive earnings and sales reports, according to the National Federation of Independent Business.

 The NFIB Small Business Optimism Index increased 1.3 points in December to 91.9, equaling the index’s highest reading of 2023. Despite the increase, the index remained below its 50-year average of 98 for the 24th straight month.

A net negative 4 percent of owners expect real sales to increase, which is its highest reading since January 2022. A net 25 percent of owners raised their average selling prices, which was unchanged from November. Thirty-two percent plan price hikes in the next three months.    

A net negative 11 percent of owners experienced higher nominal sales in the past few months as of December, up six points from the previous month. The frequency of reports of positive profit trends remained low at a net negative 25 percent, a seven-point improvement from November. Owners who reported a drop in profits cited weaker sales, rising materials expenses, lower prices and higher labor costs.  

 Small business owners expecting better business conditions over the next six months rose six points from November to a net negative 36 percent, which is 25 percentage points better than the net-negative 61 percent last June. A net 36 percent raised compensation, which was unchanged from November. 

Forty percent reported job openings that they could not fill in the current period. Owners’ plans to fill open positions remained high, with a seasonally adjusted net 16 percent expecting to create jobs in the next three months. 

Twenty-three percent of small business owners cited inflation as their No. 1 problem in operating their business, an increase of one point from November and surpassing labor quality — 20 percent — as their top operations-related problem. Inflation was measured at 3.1 percent for the 12 months ending in November, compared to 3.2 percent in October.   

“Small business owners remain very pessimistic about economic prospects this year,” said NFIB Chief Economist Bill Dunkelberg. “Inflation and labor quality have consistently been a tough complication for small business owners, and they are not convinced that it will get better in 2024.”